Industry Studies: Consumer Goods Industry

Topic: Developing and implementing strategies globally

Topic Number: 9

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Overview

Organisations operating in the CGI need to develop a robust framework to determine how decision-making is done and implemented. A key decision is the level of head office control vs subsidiary autonomy as this has significant implications for global strategy alignment.

In this lecture, we will explore a multitude of these issues and determine how different organisations approach them. We will initially determine the impact of international business activity on organisation design and look at the 5 forms of international organisation design. Thereafter, we will go on to explore the purpose of control and how decisions are developed in international business.

Finally, we will look at some issues relating to implementation.

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Learning Outcomes

• Determine and articulate how strategy is developed globally

• Understand and discuss the dynamics of home country control vs local subsidiary autonomy

• Be able to explain the key features of organisation control and how it influences decision making and implementation

• Critically evaluate the key issues that organisations in the CGI may face when developing and implementing strategy

Developing and implementing strategy

Every company has two organisational structures: The formal one is written on the

charts; the other is the everyday relationship of the

men and women in the organisation.

Harold Geneen

I try to motivate people and align our individual

incentives with organisational incentives.

And then let people do their best.

John Liu

Why is organisation design important to strategy development?

Allocate resources

Provide information

Assign tasks

Obtain information

Different organisation approaches

Corollary Approach

Export Approach

International Approach

Span of control

Global Organisation Design

Global organisation design

• Area Knowledge

• Product Knowledge

• Functional Knowledge

5 forms of organisation design

Product design

Area design

Functional design

Customer design

Matrix design

Why is organisation design important for strategy and implementation?

Determines who makes the decision

Determines what the objective is

Determines how the decision

affects strategy

Determines who implements

strategy

For example…

Related Products Unrelated Products

M-Form

Multidivisional

H-Form

Holding

Global product design

Advantages Disadvantages

Management Skill

Efficient Production Coordination Levels

Global Marketing Corporate Learning

Global product design

Duplication of Efforts

Chapter 14 - 13

Marketing-Driven Strategy

Brand-Name Reputation

Local Market Expertise

Global area design

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Disadvantages of global area design

May sacrifice

cost efficiencies

May slow diffusion of technology

Results in duplication

of resources

Raises costs of

coordination

Impedes global

product planning

•Transfer Expertise

•Centralize Control

•Focus on Functions

Global functional design

Limited Products or Customers

Difficult to Coordinate

Duplication of Resources

Disadvantages of global functional design

Take 5 minutes and determine the structures of these companies

Levels of global control: Managerial Philosophy

Ethnocentric Polycentric Geocentric

Decision Making Focus

Corporate Headquarters

Local Subsidiary

Local Market

Response

Overall Needs of the Firm

Lower Higher

Higher Lower

Centralisation vs Decentralisation

Little Formal Power

Substantial Authority

Board of Directors

Decentralization

Local Business and Politics

Ethical and Social Responsibility

Level of Accountability

Empowering the subsidiary board of directors

Organizational Hierarchy

Rules and Procedures

Ad Hoc TechniquesInformal

Mechanisms

Coordination in the global organisation

1. Define Control Standards

2. Develop Performance Measures

3. Compare Performance and Standards

4. Respond to Deviations

Keeping decision-making and implementation in check

Accounting Systems

Policies and Procedures

Rules and Regulations

Performance Ratios

Control techniques

RecognisingResistance

MinimisingResistance

Behavioural Aspects

•Reaction to Over-Control

•Inappropriate Focus

•Increased Accountability

What causes resistance?

CultureDiagnostics

AccountabilityParticipation

Reducing Resistance

End of presentation

© Pearson College 2013